Mr Coppel accused Home Secretary Shabana Mahmood of allowing her judgement to be clouded by the need to house those migrants.
But James Strachan KC, for the Home Office, said block booking rooms “does not change its use as a hotel”.
He argued it was not in the public interest to grant an injunction, when considering “the backdrop of multiple other local authorities seeking similar” rulings.
Representing Somani Hotels, Jenny Wigley KC said the business had been in financial decline “for many years”.
She added there had been no changes to the building’s structure and the only external changes were to install security fencing in response to the protests.
The hearing, before Mr Justice Mould, is due to conclude on Friday.